Economic Analysis and Inter-Jurisdictional Competition

Abstract

The European Union does not set its regulatory principles in line with those that the theory of public goods suggests. The Union does not have full competence in areas such as defence that might involve public goods over a Europe-wide area. Yet it does have competence over many areas that should be left to member states or local government. However, if competition between jurisdictions is prevented, there will be a drift towards centralisation of economic decision-making. This paper analyses this trend from the point of view of the theory of clubs and theories of market failure.